The thoughts of Michael Cadwallader. Coffee loving, history book reading, Cheshire man.

Wednesday, July 05, 2006

The Mess That Gordon Made?

The average family is 10 per cent worse off than it was five years ago, according to a new analysis of income and outgoings before and after tax. The accountants Ernst & Young said yesterday that average incomes had risen but most households' mortgage and fuel costs had increased by even more. Motorists' costs over the period rose by more than a third.

Higher council tax, national insurance contributions (NICs) and income tax helped to knock £82 a month off a typical family's discretionary spending power, said Tim Sleep, of Ernst & Young. The accountants used figures from the Office for National Statistics, the Bank of England and many other sources to measure domestic incomeand expenditure. Taking a couple with two children aged under 16 as their typicalfamily, Ernst & Young calculated that income before tax increased by 18 per cent to about £3,670 per month, or £44,000 a year. But, during the same five-year period, income tax and NICs jumped by 25 per cent to leave them with net income of £2,640 per month, or £31,680. Heavier borrowing secured against property caused typical mortgage costs to jump by 66 per cent to exceed £600 a month. Motorists' costs rose by more than a third while some household utilities, such as gas, now cost half as much again as they did five years ago. The cumulative effect on the average family has been to cut the cash it has to spend on whatever it likes by one tenth, to about £740 per month. Mike Warburton, of the accountants Grant Thornton, said: "This is why we have the Government telling us we are better off while we feel worse off, because we are left with less to spend on things we enjoy."

The property/equity pips have been squeezed to the max, now the pips are squeaking like a pack of rats in a burning house!